The One Million Job Disaster

Senate Democrats are planning a vote in the first part of 2014 on a bill that would raise the federal minimum wage by nearly 40 percent from $7.25 an hour to $10.10 an hour. The New York Times and Associated Press have reported that this push for higher mandated wages is part of a 2014 election-year strategy.

This new analysis from economists at Miami and Trinity University uses updated Census Bureau data from 2012 and 2013 to provide state-level estimates on the number of jobs that would be lost as a result of a $10.10 wage hike. Across all 50 states, the updated analysis shows that at least 360,000 jobs — and as many as 1,084,000 jobs — would be lost. The analysis also describes the family status and income of affected workers, demonstrating why a higher minimum wage is poorly-targeted to help individuals in poverty.

The economic consensus on the minimum wage is that a 10 percent increase causes a one to three percent drop in employment for affected groups such as teens. Some studies have found larger employment results for young high-school drop outs, in the range of a six percent drop in employment for each 10 percent mandated wage increase.

In the estimates below, we provide a “low” and “high” estimate for job loss, and also includes a mid-range estimate that allows for a larger employment response for young high school drop-outs.

EMPLOYMENT LOSS FROM A $10.10 MINIMUM WAGE

State

Low Estimate (e = .1)

High Estimate (e = .3)

Mid-Range (e = .2 / .6)

Affected Employment

All States

361,506

1,084,518

930,513

23,931,018

Alabama

7,942

23,827

20,061

427,120

Alaska

387

1,162

1,089

33,722

Arizona

5,561

16,682

14,122

434,825

Arkansas

4,869

14,607

12,065

262,505

California

33,339

100,016

82,008

2,704,991

Colorado

3,862

11,586

10,139

316,037

Connecticut

1,507

4,521

3,914

164,974

Delaware

1,163

3,488

3,092

69,504

D.C.

195

585

444

22,118

Florida

16,289

48,866

39,226

1,399,420

Georgia

12,913

38,739

32,324

825,433

Hawaii

1,414

4,241

3,268

96,154

Idaho

2,635

7,906

7,652

142,804

Illinois

9,191

27,572

22,786

875,553

Indiana

9,834

29,502

27,819

555,623

Iowa

5,229

15,687

15,519

276,905

Kansas

4,612

13,835

12,545

259,884

Kentucky

7,132

21,395

17,324

422,317

Louisiana

6,751

20,254

15,774

402,474

Maine

1,706

5,117

4,610

108,078

Maryland

6,082

18,247

15,614

382,633

Massachusetts

4,509

13,526

12,129

386,507

Michigan

12,899

38,698

31,108

797,260

Minnesota

6,506

19,517

19,219

389,282

Mississippi

4,037

12,110

10,038

242,014

Missouri

6,517

19,550

16,345

454,118

Montana

1,008

3,023

2,584

74,162

Nebraska

2,859

8,578

8,407

172,047

Nevada

1,766

5,298

4,391

180,919

New Hampshire

1,444

4,333

4,322

95,457

New Jersey

10,718

32,153

26,825

675,297

New Mexico

2,610

7,830

6,851

168,182

New York

22,975

68,924

57,369

1,455,013

North Carolina

16,176

48,527

40,392

944,154

North Dakota

817

2,451

2,380

52,976

Ohio

10,283

30,848

25,796

790,941

Oklahoma

5,644

16,931

15,747

322,588

Oregon

901

2,702

1,946

161,105

Pennsylvania

16,349

49,048

44,202

935,126

Rhode Island

929

2,787

2,404

71,059

South Carolina

7,314

21,943

19,429

419,856

South Dakota

1,173

3,518

3,306

74,358

Tennessee

10,488

31,463

27,293

567,322

Texas

42,872

128,617

111,530

2,515,717

Utah

3,958

11,873

11,346

252,573

Vermont

208

625

518

28,912

Virginia

10,583

31,750

25,612

607,552

Washington

744

2,233

1,821

207,650

West Virginia

2,599

7,798

6,189

149,364

Wisconsin

9,312

27,937

27,659

512,465

Wyoming

696

2,089

1,960

43,968

Family Status and Family Income

Twenty eight states increased their minimum wages between 2003 and 2007, prior to the last federal minimum wage increase. Economists from Cornell and American University, who studied data from that period, found no associated reduction in poverty rates. Poor targeting helps explain the disappointing result: Nearly 60 percent of the working-age poor don’t work and thus aren’t affected by a minimum wage increase. (Similarly, many other poor individuals already earn considerably more than the minimum wage, but are in poverty for other reasons such as lack of work hours.)

The targeting problem extends further to those who do earn the minimum wage and are affected by an increase. As the data below demonstrate, many minimum wage earners either live at home with family or are in a household where they aren’t the primary earner. For instance, nearly 60 percent of employees affected by $10.10 either live with family or relatives, or are second-earners in a married couple. As a result, their average family income ($54,445) is considerably higher than the full-time minimum would suggest.

FAMILY STATUS OF AFFECTED EMPLOYEES, $10.10 MINIMUM WAGE

Single Adult

Single Parent

Married, Sole Earner

Married, Dual Earner

Living w/ Family, Relative, Sub-Family

All States

22.05%

8.84%

9.37%

20.55%

39.19%

AVERAGE FAMILY INCOME OF AFFECTED EMPLOYEES, $10.10 MINIMUM WAGE

State

Mean

All States

$54,445

Alabama

$50,206

Alaska

$73,065

Arizona

$52,445

Arkansas

$42,147

California

$52,852

Colorado

$58,810

Connecticut

$80,125

Delaware

$57,104

D.C.

$58,634

Florida

$49,475

Georgia

$47,661

Hawaii

$65,644

Idaho

$47,161

Illinois

$60,631

Indiana

$54,255

Iowa

$54,260

Kansas

$48,666

Kentucky

$43,513

Louisiana

$44,528

Maine

$56,170

Maryland

$73,995

Massachusetts

$76,683

Michigan

$61,866

Minnesota

$61,006

Mississippi

$45,151

Missouri

$56,268

Montana

$40,270

Nebraska

$49,751

Nevada

$48,993

New Hampshire

$81,571

New Jersey

$74,552

New Mexico

$52,692

New York

$63,120

North Carolina

$44,554

North Dakota

$59,701

Ohio

$53,882

Oklahoma

$45,509

Oregon

$43,672

Pennsylvania

$60,720

Rhode Island

$66,839

South Carolina

$44,737

South Dakota

$46,915

Tennessee

$42,972

Texas

$47,571

Utah

$57,740

Vermont

$56,364

Virginia

$63,158

Washington

$59,055

West Virginia

$47,013

Wisconsin

$58,812

Wyoming

$46,648

Better Alternatives

Economists and politicians in both parties have strongly supported alternatives to raising the minimum wage such as the Earned Income Tax Credit. It’s an income boost that operates through the tax code instead of through a mandate on employers, so it doesn’t have the same negative employment consequences as a minimum wage increase. It’s better-targeted to poor families, and research shows it can actually boost employment for groups such as single mothers since earned income is required to receive it.

Because of the EITC, the minimum wage for a single parent is already above $9 or even $10 an hour, depending on the state they live in. The EITC could be improved even further on the federal level by increasing the benefit level for childless adults. Additionally, more states could choose to provide a supplement to the federal credit. Unlike a higher minimum wage, these options would actually have a measurable impact on the well-being of low-income families.